Articles in Category: Sequestration

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Sequestration Articles
Articles discussing the sequester and its impact to defense contractors. The articles in this category provide background, discussion, and recommendations for entrepreneurs and smal business owners.

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Updated DoD Sequester Guidance

on Friday, 15 March 2013. Posted in Sequestration

Updated Defense Guidance

The sequester shows no signs of slowing down. The President issued the order to execute the 2011 Budget Control Act which outlines the sequester. Again, as the Department of Defense (and all federal agencies) are operating under a continuing resolution, guidance is pouring out from the various agencies and armed services.  Specifically, the Secretary of Defense issued the following guidance:

  • Major cutbacks to congressional delegation travel. Military aircraft restricted.
  • Tuition assistance programs for service members and their families.
  • Civilian bonuses
  • Cuts to military entertainment and public affairs including air shows
  • Shutting down a carrier air wing in April
  • Deployment cancelled for six naval ships and several ships brought back to the US

Addtionally, unless changes are made, the Department of Defense will initiate civilian furloughs on April 26, 2013. The furloughs are for 22 days - though the end of fiscal year, September 2013. To be clear, for all federal agencies and the Department of Defense combined, more than a million people will be told to stay home one day every week. This means one million people will see one-fifth, or twenty percent, of their paychecks cut for the next five months. Imagine having to pay your mortage, bills, and other expenses with only 80% of what you bring home today.

On March 14th, the Department of Defense started to outline exceptions to who would be furloughed. These include:

  • Fire, safety, and health positions
  • Civilians deployed to combat zones
  • Police and security guards on installations where manning levels are under 25%
  • Medical staff who provide 24 hour emergency services

Additionally, based on Defense guidance, military resale (commissaries, military exchanges) have also provided updated guidance:

  • Non-mission critical travel has been cancelled
  • Most training is on the cutting block - specifically tuition assistance
  • Hiring freezes
  • Overtime and compensatory time have been cancelled
  • Many annual conferences, internal and with industry, have been cancelled except those to maintain professional certifications

Absent the Republicans accepting tax increases and the Democrats accepting program cuts, the damage from the sequester will severely impact our service members and their families.

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Joshua P. Frank is Principal and owner of RSM Federal, a federal consulting and business-acceleration strategy firm that represents small and large businesses in accelerating the education and processes necessary to win government contracts. For more information and videos about RSM Federal, please visit www.rsmfederal.com 

Sequestration

on Friday, 08 March 2013. Posted in Sequestration

How will sequestration impact small business?

There is a universal fear across the small business community that Sequestration will be catastrophic to small business owners. Yes, it will be catastrophic to some but to others the challenge will be sustainment and even growth. To understand the impact of sequestration, you have to first understand why some companies succeed selling to the government and why others fail.

Let's use GSA Schedule holders as an example.  You don't need a schedule to win government contracts, but GSA Schedule holders are a microcosm of government vendors. Today, there are approximately 22,000 companies with a schedule of which 10,000 have failed to meet the $25,000 minimum annual sales threshold.  That's almost half of all GSA Schedule holders (47%). For the 10,000 that failed to meet the minimum sales threshold, 7,000 failed to make a single penny.

Before we can answer the impact of sequestration on small business, we need to ask why half of all companies fail to sell to the government.  Many of these companies have been attempting to sell to the government for years. So why have they failed when others succeeded?

Companies that succeed have educated themselves. They educate themselves on the market by teaming with other companies to gain perspective, experience, and access to marketing and proposal templates. Working with companies that have successfully sold to the government is as valuable as any activity a company can undertake. Successful companies never stop educating and improving their business development strategies. They register for government newsletters and blogs, pay attention to what is happening in Congress, and keep their finger on the pulse of the budgets and programs of the federal agencies and Defense organizations identified as their primary targets.

Successful companies also have a well defined market penetration strategy. They recognize their strengths and weaknesses. They don't believe their own press releases. They only go after opportunities which fall within their core competencies and they have a documented process to qualify opportunities before engaging them. Less successful companies go after everything hoping to win something. Education is not only understanding the market but learning the techniques and strategies to properly differentiate, ghost the weaknesses of the competition, and building competitve advantage. Most important, successful companies are not afraid of picking up the phone and calling, over and over and over again, until they get the government contracting officer or program manager on the phone.

So regardless of the Sequester, This is why fifty percent of companies fail to successfully sell to the federal governmnent. It's not because they have inferior products or services. It's an issue of education. It's that simple. . . and that difficult.

The 2013 federal proposed budget is $3.8 trillion with $1.2 trillion for appropriated programs and $2.5 trillion in mandatory programs for programs such as medicare, medicaid and social security. Half of the approporiated funds, $613.5 billion, is the Department of Defense's proposed budget. The Federal Acquisition Regulation (FAR) requires that 23% of federal spending be made with small business. That's $149 billion from appropriated funds, not including Defense and another $141 billlion with Defense for a total of $290 billion in small business set-asides in 2013 or more than $790 million a day.

Without sequestration, the Department of Defense's proposed budget equates to $1.4 billion in spend per day. What many don't realize is that the $1.2 trillion in sequestration takes place over ten years so sequestration drops 2013's proposed budget from $1.4B to $1.2B per day. Under sequestation, small business set asides will be more than $100 Billion in 2013.  

That's a lot of money for small businesses. Using GSA Schedule holders as a microcosm for federal contractors, the 53% of federal contractors that successfully sold to the government in 2012 will take advantage of the 47% that haven't cracked the code. 

These facts speak for themselves. Small businesses must accelerate their understanding of the federal market and implement proven techniques and strategies to sustain and grow in this budget constrained environment.

Sequestration is not catostrophic for small business.  Regardless of its name, sequestration is simply a smaller budget. If your company understands the market, has a strong capture strategy, and is teaming with other successful federal contractors, there is plenty of money to be made. The 53% will sustain and yes, they will grow.

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Joshua P. Frank is Principal and owner of RSM Federal, a federal consulting and business-acceleration strategy firm that represents small and large businesses in accelerating the education and processes necessary to win government contracts. For more information and videos about RSM Federal, please visit www.rsmfederal.com

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